TaxTMI 
TaxTMI 
2022 (1) TMI 1270
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....ee company is an NBFC company and engaged in trading of units of various mutual funds and conducting investment activities in shares and fixed maturity plans. It filed its return of income on 28.11.2014 declaring the total income at Rs.7,39,47,480/-. During the course of assessment proceedings, the AO observed from the Profit & Loss Account that the assessee has shown the following receipts as income from operation in the Profit & Loss Account:- 4. He noted that the income from sale of long-term investment includes longterm capital gain of Rs.2,68,26,245/- on sale of shares which has been claimed as exempt and the balance amount of income has been claimed as business loss as arising out of sale of investment held for short-term period. Therefore, the total income which has been claimed as exempt by the assessee comes to the following:- 5. He noted that the assessee has shown two types of investments in the balance sheet. As on 31.02.2014, current investments were at Rs.39,63,29,523/- and non-current investment at Rs. 2,67,52,24,025 including investment of Rs. 31,57,59,224 in tax free bonds. He noted that the profits arising out of sale of securities in current investment are offe....
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....f the assessee. This Ground o Appeal is therefore dismissed. " 3.3. Since the facts are similar in the present appeal, no interference is called for with my predecessor. Therefore, disallowance of Rs.1,08,69,547/- u/s 14A read with rule 8D is sustained. This ground of appeal is ruled against the appellant." 9. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal. 10. The ld. counsel for the assessee submitted that for disallowance u/s 14A(2), only the actual expenditure incurred to earn the income has to be disallowed and no disallowance can be made on notional basis irrespective whether expenditure has been incurred or not. For the above proposition, the ld. Counsel for the assessee referred to the decision of the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT, reported in 347 ITR 272. He submitted that in the instant case, the Assessing Officer has not pointed out any item of expenditure incurred by the assessee to earn the dividend received from Dabur India Ltd. and Ayurvet Ltd. He submitted that there is no change in the investment made by the assessee in the immediately preceding year and the year under consideratio....
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.... Rules in respect of shares for which no dividend has been received. For the above proposition, he relied on the decision of the Hon'ble Madras High Court in the case of CIT vs. Shri Ram Ownership Trust, reported in 318 CTR 233 (Madras) and the ITAT Delhi Special Bench decision in the case of Vireet Investment, reported in 165 ITD 27 (Del) (SB). 11. The ld. DR, on the other hand, heavily relied on the order of the CIT(A). 12. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee, in the instant case, has received dividend income of Rs.27,02,35,558/- from investments made by it in the equity shares, which was claimed as exempt income. The assessee, while computing the disallowance u/s 14A has suo moto disallowed an amount of Rs.2,41,164/-, the details of which are as per para 5 above. We find, the AO, without recording any satisfaction as to how and why the computation filed by the assessee making suo moto disallowance of Rs.2,41,164/- is incorrect, computed the disallowance at Rs.1,....
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....ssessing Officer to delete the addition." 13. Since the AO in the instant case has not recorded his satisfaction before making the disallowance, therefore, respectfully following the decision of the Tribunal in assessee's own case for AY 2010-11 where it is held that in absence of any satisfaction recorded by the AO, the disallowance made by him and sustained by the CIT(A) is not correct, we set aside the order of the CIT(A) and direct the AO to delete the addition. The grounds of appeal Nos. 1 and 2 raised by the Revenue are accordingly dismissed. 14. Ground No.3 raised by the assessee reads as under:- "3. That both the Ld. CIT(A) and Ld. AO erred in law and in facts in total disallowance of Rs 18,37,557/- lakhs on account of foreign travel (Rs 14,09,855) and business promotion expenses (Rs.5,93,103) in an adhoc manner, without taking into account the business needs of the assessee." 15. Facts of the case, in brief, are that the assessee, during the year under consideration, has debited an amount of Rs.14,09,855/- towards 'travelling and conveyance' and an amount of Rs.5,93,103/- towards 'business promotion' in the P&L Account. From the details filed by the assessee, the AO n....
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....tment in India as well as to examine the availability of better opportunities to make investment outside India. Referring to the provisions of section 37 of the IT Act, he submitted that as per the said provisions, any expenses laid out or expended wholly and exclusively for the purpose of business are to be allowed. Referring to the decision of the Hon'ble Supreme Court in the case of Sasoon J. David & Co. Pvt. Ltd. vs. CIT reported in 118 ITR 261, he submitted that the Hon'ble Supreme Court held that the expression "wholly and exclusively" as used in Section 37 does not mean necessarily and if the expenses have been incurred voluntarily and for the purpose of business, the same has to be allowed. Referring to the decision of the Hon'ble Supreme Court in the case Eastern Investment Ltd. vs. CIT in 20 ITR 1, he submitted that the Hon'ble Supreme Court has held that in order to prove the expenses allowable, it is not necessary to show that the expenditure was a profitable one or that any profit was earned. It is enough that the money was expended "not of necessity" and with a view to a direct and immediate benefit to that trade, but voluntarily and on the ground of commercial expedi....